A defining trait of Silicon Valley is a willingness to fail, get up, and fail again. Unlike in regions more focused on saving face than in innovative excellence, “The Valley” is true to the scientific method: if you push to get things right, you will be rewarded.

That selfless spirit of experimentation has made Netflix cofounder, and education entrepreneur, Reed Hastings, a textbook Silicon Valley success story. A former math teacher, with a satchel full of teachable moments, Hastings has learned what works at the lucrative intersection of technology and education, or Ed Tech, the focus of the Education Innovation Summit (EIS) where Hastings and I met.

REED HASTINGS: About half my work in education is US political reform around school districts and charter schools, and creating more room for entrepreneurial organizations to develop. And about half on technology, which I look at as a global platform.

So, how do we, the people in this room, figure out scenarios where we get our company started and going? Because even Microsoft once was only one million dollars in revenue. Many of the firms in this room are at that stage. And the question is, how over 30 years -- because there’s a big change vector in your favor -- do you evolve from a million dollars in revenue to 20 billion dollars in operating income?

That’s a good outcome. And some of you may be able to achieve that because this growth vector of connectivity, online learning, the importance of learning, is just going to be phenomenal. And it’s very technical.

Building good, personalized, adaptive learning models has so little to do with producing textbooks today. When you think about producing textbooks -- something that many firms have become very profitable on -- think about it like making movies. It’s not easy. It’s its own skill. But it’s a completely different skill from making video games.

All the movie companies -- over 10, 20 years -- have tried to break into the video game market, and none of them have succeeded. Because even though a video game like Halo is storytelling, and a movie is storytelling, they’re different enough that it’s completely different firms like EA [Electronic Arts] that have developed the particular skill sets. I think that’s what we’re going to see around personalized adaptive curriculum: it’s a totally different skill set than building a linear textbook, whether that’s a digitized textbook or a paper textbook. And that creates tremendous opportunity.

What’s got me excited about the education space is the growth of the Internet over the next 10, 20, 30 years. It’s so big that if you look at fiber optics, you can think of it as the “fiber optic revolution.” Many of you have heard that Netflix is one third of the Internet on Saturday night when everyone is watching videos. It turns out that all Netflix streaming peak on Saturday night can fit inside a single fiber optic, which is the size of one human hair. That’s because the physics of fiber optic are so amazing. And that’s why I’m so convinced that we’re at the very beginning of a multi-decade explosion in bandwidth connectivity and in all the things that become the substrate for all of you to build incredible [education] businesses.

So, with that, let me pause, and open it up for questions. [Applause].

The question is, “Can school districts continue in the form that they are in now?” This is a US-specific political question. In general, nothing goes away in politics. It’s too hard to get anything to go away. That’s why we [still] have the office of the Royal Astronomer. It just gets weaker.

What we want to do is grow the capacity on the charter school side. In Arizona, we’re up to 10 percent of kids now in charter schools. In California, we’re about eight percent in charter schools. But where you really get excited is when you look at DC at 22 percent.

Or you look at New Orleans at 70 percent of kids. And the NAEP [National Assessment of Educational Progress] scores in New Orleans are rising. What we’re going to see in New Orleans is the fullest proof of when you really allow charter schools to thrive, to compete with each other, to learn from each other -- and they’re also going to be rapid adapters of [education] technology from all of you -- that we’re going to get incredible results.

Hopefully, in the US political context, we’ll turn New Orleans into the role model for big city reform. The school district still exists in New Orleans and it plays a critical role in general oversight. And in bringing to town more and more charter school networks. Sort of like a Chamber of Commerce would to develop business. I hope that it will become a long-term model for great education.

A question about selling to school districts. There’s two things. One is obviously it’s a very inefficient market to sell to because of the monopoly structure. School districts in the US don’t adopt technology very quickly. If you look at USA Today today, there’s a story about churches using QR codes that have a cross built in the pattern. Churches are amazing adopters of technology. And so are all the other sectors of our society with the exception of these monopoly school districts that are really reacting to voter forces more than to market forces.

So, it’s a tough thing in the US. It will happen more and more as charter schools grow. So, for example, in many school districts in Arizona, the concentration of charters has risen so high that now school districts are trying to co-op their advantages, i.e., adopting technology. We’re seeing that in San Jose, California, where Rocketship is small but growing. The best friend of the [education] technology movement in the United States are charter schools to provide competition for school districts.

You’ll [still] get most of your money from the school district. But it’s what you pioneer with charter schools that will drive that adoption. Take Halo, which has had a couple hundred million dollars of investment. It’s a leading franchise game on the Xbox. What if people spent a couple hundred million dollars like that to develop high school chemistry? Imagine high school chemistry on an Xbox with an incredible amount of graphics where you’re moving among the molecules and you’re assembling things.

And in biology you’re doing this with DNA. All of science is very physical, but it’s sometimes hard to imagine things. The immersive, surround, virtual reality environment would be a huge asset [in teaching science]. But today no one develops that technology because there’s not an Xbox for every kid in the classroom. But what’s going to happen with the advent of Cloud-based GPUs and great bandwidth is that gaming goes to the Cloud. Massive computational power. Hundreds of Xboxes in the Cloud at low costs. Both the bandwidth and the low computational costs will give you an immersive kind of experience that you’re just getting a little taste of with the 360 today. It will be quite affordable. And it won’t have to be in a school. The only thing that has to be in a school is a screen with some UI sensors. And so, it will be low cost on the client side. Great bandwidth, then great computational power.

The question is where do I wish Ed Tech spent more time. I’m a big fan of the market. I’m not trying to be the central planner that says, “We need 50 people there. We need 30 people here.” The entrepreneur should follow some instinct and passion that they have. Doing what somebody else says doesn’t generate that kind of courageous “Damn the torpedoes, I’m going to go build a company in this area” mentality. All you have to do is find something that gets you to a couple of million of revenue. A million users. And then you make it better, and better, and better. And if you look at Facebook from the original Harvard dorm 10 years ago, or you look at Microsoft over 30 years, or you look at Boeing or GE or any long-term company, it all started like Starbucks with a single coffee shop.

And then it’s, “OK, let’s refine the experience. Let’s make it better. Let’s take it to scale.” There’s great potential for people in this room to build those companies in this area. Because [education technology] has been under-addressed.

REED HASTINGS: They’ll be many free things like Wikipedia, Open Courseware, the MIT stuff. And that’s always going to be a big part. But I think there’s also opportunities for pay markets. Because then you can do more individualized work. You can have more people involved in it. And not have it be 100 percent software. But, rather, a mix of software plus people. It’s all part of this creative unlocking in the digital age where you can produce once and consume many times. And that’s bringing down costs. Because what we want to do is bring down the costs of a great education. You can do that with technology.

CROTTY: A good example of that is textbooks. The price of textbooks is ridiculous. There are companies like Rafter and others that are allowing one to rent a textbook and, are, thus, bringing down those costs. That’s exactly what you’re talking about, right?

HASTINGS: Think about textbooks. The first level is, “Why don’t we take a textbook and scan it in and make it a big PDF.” That saves some printing costs. But that’s a very limited vision. What you really want to do is change the online experience so it’s adaptive to the individual person. Like what DreamBox Learning has done, and what many companies here are doing. Which is figuring out how to use technology uniquely. So, it’s the difference between a movie and a video game. A movie is like a textbook. It’s a linear story. It’s somebody’s vision. A video game is already interactive. The end user is much more immersed. And it’s harder to build. And a unique skill. What the new generation of curriculum companies are building is this interactivity.

CROTTY: So, things that will work on the Apple iPad, et cetera. A more robust, visual, interactive experience.

CROTTY: So, basically everything you’ve learned from being in the movie business via Netflix and applying it to education.

HASTINGS (laughs): It’s amazing how much crosses over. How digital changes everything. How the Internet allows new experiences to be created.

CROTTY: So, to your point about 3D and all that immersive stuff. You can go to a convention like CinemaCon and they’re not talking about education, but they should be. Is that what you’re saying?

HASTINGS: Or education entrepreneurship. To learn that. To absorb that. They are doing games for pure entertainment. That’s great too. But this crowd here really understands the dynamics of kids and learning in K12. So, it’s applying that new technology and those new metaphors.

CROTTY: Last question. There’s all this talk about badges and alternative forms of credentialing. A badge in lieu of a diploma. I’ve written about it. There’s so many people in the tech industry who didn’t even finish college, yet there’s so much emphasis on this degree thing. “How do I know you know anything?” is a big question an employer has. An employer could always say, “Well, you got that degree from Harvard so I know you know something.” Is that going to go away?

HASTINGS: Well, it must have gone away because I never got that degree.

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